AAII Sentiment Survey: Optimism Rebounds to a Three-Month High

Optimism among individual investors about the short-term direction of stocks continues to rebound and is now at three-month high. Pessimism is also higher in the latest AAII Sentiment Survey, while neutral sentiment has fallen back into its typical range.

Bullish sentiment, expectations that stock prices will rise over the next six months, extended its rebound to a third consecutive week by rising 1.9 percentage points to 38.6%. This is the largest amount of optimism recorded by our survey since February 21, 2018 (44.7%). The historical average is 38.5%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, plunged 6.5 percentage points to 36.3%. The drop puts neutral sentiment at a five-week low. Nonetheless, neutral sentiment remains above its historical average of 31.0% for the 14th consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 4.6 percentage points to 25.2%. Bearish sentiment remains below its historical average of 30.5% for the sixth consecutive week and the 20th time out of the past 24 weeks.

Prior to this week’s decline, neutral sentiment had been at an unusually high level for three consecutive weeks. Additionally, bearish sentiment was at an unusually low level last week.

Many individual investors, but not all, anticipate continued volatility and/or think that the current political backdrop could have a further impact on the stock market. Trade policy is influencing some individual investors’ sentiment. While many either approve of the Federal Reserve’s plan to gradually raise interest rates or don’t expect it to affect the stock market, some AAII members are concerned about the impact that rising rates will have. Also influencing sentiment are valuations, tax cuts, earnings and economic growth.